But Ballmer says improvements, including a new Surface and a new Metro Start Button, will win customers back

At a quarterly all-hands type meeting, Microsoft Corp.'s (MSFT) boisterous and ebullient CEO Steve Ballmer was more sedate than usual. While he raved about the upcoming next generation Surface tablet -- which was garnering rave reviews internally -- he also reportedly owned up to an unpleasant fact that Windows 8 isn't selling well.

Microsoft and Mr. Ballmer came under fire from some of their major partners. Samsung Electronics Comp., Ltd. (KSC:005930) blamed Microsoft for drooping PC (and by proxy semiconductor component) sales. Jun Dong-soo, head of the memory chip unit who sells DRAM and NAND to PC makers, called Windows 8 "less competitive" and complained, "[It is] no better than the previous Windows Vista platform."

Those are pretty harsh words coming from a major partner.

At the meeting Mr. Ballmer tried to convince employees that the free Windows 8.1 update would make up for the flop of its predecessor. He pointed to the return of a "Start Button" (although it's notthe Start Button you used to know) and the use of telemetry data to improve weak spots in Windows 8 as critical keys to the turnaround. He also discussed increasing spending on professional services (consulting), although the leaks from the meeting made it unclear whether Microsoft is looking to recruit outside consultation for itself or make money off providing it to others.

Ballmer thinks a new Metro Start Button will thrill Windows fans back to the ranks.

In the second calendar quarter Google Inc. (GOOG) ChromeBooks gained major ground on Windows PCs, establishing a beachhead of approximately 4-5 percent of total personal computer sales, and a quarter of <$300 USD personal computer sales. Some OEMs such as Samsung and Acer, Inc. (TPE:2357) (another prominent critics of Windows 8) have turned to Chromebook offerings, and may be eyeing dumping Microsoft entirely, shoudl consumers continue embracing Google's offerings and rejecting Microsoft's.

quote: At the end of the day Win8 is a great rebranding of Microsoft which is something that was becoming an increasing issue, so it is good that they did it.

I think that Windows 8 and Surface were a horrible rebrading of Microsoft. Both products are failures. Microsoft should have stuck to its core competencies. This rebranding is like MySpace's rebranding, or Blackberry's rebranding- bold attempts, but failed attempts. A rebranding is a risk- if your brand is already popular you don't want it to become synonymous with failure. You don't want a New Coke.